US fiscal cliff: Industry keeps a close watch

According to industry observers, healthcare schemes of the country such as Medicare are likely to be affected by the spending cuts of the government. The various provisions under the new Patient Protection and Affordable Care Act, popularly known as Obamacare, will serve a blow to bioscience companies. For example, the medical devices industry is staring at a new excise tax that will raise the costs for companies and affect start-ups in the long run.

"With the start of the new year, the medical device industry faces the implementation of an excise tax that was passed as part of the Patient Protection and Affordable Care Act. This is a 2.3 percent tax on revenue, not profit. It's intended to raise at least $20 billion over 10 years, but will disproportionately impact young, innovative companies," observes Mr Burrill, adding that even though the industry is working to repeal the tax, the fiscal cliff complicates these efforts. "The best chance of addressing this will be a comprehensive tax reform bill," he says.

The reforms and rising costs of healthcare will put drug companies under pressure as well. According to Burrill, price pressures on drug companies will continue and only intensify as governments face fiscal pressures and seek to contain the cost of healthcare. "This reality is driving drugmakers to focus on drugs for unmet medical needs, personalized medicines, and therapies for rare diseases where they can make clear arguments about the value of their products and most easily justify premium pricing. New digital health technologies are providing incredible opportunities to improve access and delivery for providers, reduce costs for payers, and improve health for patients. Rising healthcare spending creates enormous opportunities for innovation," says Mr Burrill.

Companies wait and the watch

Most drug and medical devices companies, which BioSpectrum approached for inputs, remained unavailable for comments. "The fiscal cliff negotiations in the US are ongoing. At this stage, there is no way to predict the result. Therefore, we cannot speculate on potential outcomes or impact on our industry," responded Eli Lilly, one of the largest pharmaceutical companies of the world with headquarters in Indianapolis, Indiana in the US.